Sweden holds rate, to reinvest maturing bonds from Jan.

      Sweden’s central bank left its benchmark repo rate at -0.50 percent, the third lowest in the world, but took a first tentative step toward normalizing its ultra-easy policy stance by letting its current bond purchase program expire and only reinvest proceeds from maturing bonds from January 2018.
      Despite strong economic activity, Sveriges Riksbank stressed its monetary policy stance needs to remain expansionary to keep inflation close to its target, and redemptions and coupon payments from its stock of bonds – which will amount to 290 billion Swedish krona by end-2017 – will be reinvested “until further notice.”
      With bonds worth around 50 billion krona maturing during the first half of 2019 and coupon payments of around 15 billion by June 2019, the Riksbank’s holdings of Swedish government bonds will actually increase in 2018 and in the beginning of 2019, maintaining the central bank’s presence in the bond market and ensuring an even rate of purchases.
      The Riksbank first began purchasing assets, known as quantitative easing, in February 2015 and last expanded its program by 15 billion krona in April this year. In the previous board meeting in October, it confirmed that bond purchases would run through 2017.
      In an update of its economic forecast, the Riksbank confirmed that it still expects to begin raising its repo rate in the middle of next year and then continue tightening in 2019 and 2010.
      The forecast for inflation and economic growth were also largely unchanged from October, though the forecast for growth this year was lowered to 2.5 percent from a previous 2.9 percent.
      “Economic activity needs to remain strong for inflation to continue to be close to the target,” the Riksbank said, adding “it is also important that the krona does not appreciate too quickly.”

      Sveriges Riksbank issued the following statement:
     
     

Continued expansionary monetary policy to keep inflation close to the target